WOOD Flash – GTC: 1Q21 – acquisitions and retail reopening should improve FFO, up to 20% capital increase ahead

GTC is trailing our FFO estimate for the year slightly, but we believe that the reopening of retail and the recent acquisitions mean that reaching the EUR 69m we have pencilled in for the year should be possible. The three buildings that GTC purchased in Budapest, for EUR 212m, are likely to push the LTV to around 50%, on our estimates. During the call, GTC noted that it is considering lowering its internal LTV target to around 40%, which should be compatible with an investment grade rating. The company is considering issuing a EUR 500m Eurobond, a major step away from project debt to unsecured financing, which should give management more time to focus on the underlying business, in our view, rather than manage a vast portfolio of individual loans. To push down the leverage, GTC is considering issuing up to 20% of new capital. The placement may take place at a similar time to the bond offering, and would be structured as an ABB, without a rights issue. GTC says that orders from existing shareholders should have priority in the book, which we see as important, given the discount at which the shares are trading currently. GTC hopes that the capital increase could help boost liquidity of the shares. We believe this is a crucial issue for the equity story, as we highlighted in our recent upgrade. We maintain our view that GTC remains attractively valued at the current levels.